Weekly client update – 10th July 2020

Hello, and welcome to our latest client update. It was a week that brought Chancellor Rishi Sunak’s Summer Statement and his latest response to the Coronavirus crisis. 

It was also the week that saw hairdressers and pubs re-open in England, with people cheerfully admitting to having their hair cut at 10:45pm – last orders at the barber’s may have been later than last orders at the pub.

As usual, the stock market figures quoted below were correct at close of business in the relevant market on Wednesday evening, with the commentary written on Thursday 9th July. 

With lockdown gradually being eased in the UK, and with the Summer Statement perhaps signaling the start of the official ‘fight back’, now seems to be an appropriate time to bring these weekly updates to an end, with life gradually moving to the ‘new normal’. Next week – 17th July – will therefore be the last one. We will, however, continue to keep in contact with you on a semi regular basis (although you may be glad to hear, not every week!) with our thoughts.

The Latest News 

Wednesday brought the Chancellor’s Summer Statement, largely focusing on jobs. He increased the starting level of stamp duty in England a bid to kick-start the housing market with Scotland also now looking to introduce an easing of the Land and Buildings Transaction Tax (LBTT). He also temporarily reduced VAT for the tourism and hospitality industry as he looked to protect jobs in that sector. There was also more help for businesses to persuade them to take back workers who have been furloughed – with that scheme now confirmed as ending in October. 

Perhaps the Chancellor’s most eye-catching announcement – especially for the headline writers – was his £10 ‘meal deal’. Through August we’ll all be able to get £10 off a meal out. Grab a £10 Rishi Dishi was the Metro’s headline. 

Grabbing rather more than a meal deal was Russian President Vladimir Putin, who effectively became ‘President for Life’ after a controversial poll victory gave him two more terms in power. 

Discontent rumbled on in Hong Kong as the crackdown on democracy protesters continued, and there was more gloom for the world’s airline industry as Air France announced 7,500 job losses and United Airlines said it would furlough 36,000 staff – half its US workforce. 

To counter that, the huge US services sector was reported as ‘returning to solid growth’ in June as the world’s biggest economy started returning to the new ‘normal’. To emphasise this, the US economy added 4.8m jobs in June. 

Back in the UK all the signs are that the Government will remove Chinese company Huawei from plans for our 5G infrastructure, despite warnings of dire reprisals from China. 

As we reported last week, the UK’s debt to GDP ratio has exceeded 100% for the first time since the 1960s, but UK households were saving not borrowing. This is Money reported that we saved a record amount in May. £25.6bn was tucked away, with £1.8bn paid off credit cards and £2.8bn off other loan commitments. 

The Stock Markets 

Our penultimate week was a good one for world stock markets – in one case a very good one. 

China’s Shanghai Composite Index leapt 12% in the week to close Wednesday evening at 3,403. As you’d expect, all the other markets in the Far East followed it, with Hong Kong up 7% to 26,129. The markets in South Korea and Japan were rather more subdued, rising 2% and 1% respectively to 2,159 and 22,439. 

In the US, the Dow Jones index rose 1% to 26,067 while the more broadly-based S&P 500 index was up 2% to 3,170. European markets were also up, with Germany’s DAX index rising 2% to 12,495 and the French stock market up 1% to 4,981. 

Sadly, the only market not to rise during the week was the UK’s FTSE-100 index, which was unchanged in percentage terms at 6,156. The pound rose by 1% against the dollar, closing Wednesday evening at $1.2616. 

Our Thoughts 

As we’ve noted above, the Chancellor presented what he clearly sees as the second part of his ‘recovery plan’ this week. The Autumn Budget is the third part of ‘rebuilding the economy’: hopefully that will see measures targeted at businesses and growth. As we have written previously, the only way we will ever repay the huge cost of the pandemic is with expanding businesses and a thriving economy. 

What is very clear now – and something the Chancellor acknowledged – is that not all sectors of the economy will recover at the same rate. It may therefore be that ‘targeted’ tax cuts and/or initiatives become a permanent feature of Rishi Sunak’s time as Chancellor. 

The good news this week principally came from the US, with the sharp rebound in both the services sector and jobs. Of course, it is early days – with some states seeing a significant ‘second spike’ in the virus – but the overall economic signs are encouraging. 

We’re confident that there will be similarly positive news in the UK as businesses embrace the shift to digital that Coronavirus has certainly encouraged and set out their vision for the future. As the Chancellor has said, trying to turn the clock back to the pre-Covid economy is simply not an option, but the economy will recover as lockdown is gradually eased. 

And to illustrate how much it is being eased – and how quickly events have moved in the time we’ve been writing the update – it has just been announced that pools, gyms, nail bars and tattooists will be allowed to gradually re-open through July in England with Scotland also looking at further easing as part of Phase 3 in the route map to recovery, with family & friends visits indoors now allowed. However, as many of your will no doubt be disappointed to hear, gyms are not yet open in Scotland, but it is coming! So now it’s not just ‘eat out to help out’ but – according to Culture Secretary Oliver Dowden – it’s also ‘work out to help out.’ 

We will be back with our final weekly update next week. Meanwhile, we will leave you in the company of a man who really knows the meaning of ‘eat out’: Joey “Jaws” Chestnut. 

Every year in July, thousands of people flock to Coney Island in the US for one of sport’s great events – the annual hot dog eating contest. They pack the beach in their thousands, cheering on the competitors. 

Until this year…

This year, of course, the hot dog eating contest had to be socially-distanced and was duly held indoors. The good news is that despite the lack of support, records were broken in both the men’s and women’s categories. Winning the men’s contest for the 13th time, Californian Joey “Jaws” Chestnut swallowed an impressive 75 hot dogs in ten minutes. Miki Sudo, from Connecticut, won the women’s title, downing 48½ hot dogs. 

Speaking after the contest, 36 year old Mr Chestnut said, “One of the best things about this contest is the energy the audience brings. There’s been years when I don’t feel my best and the audience pushes me.” 

You know, after eating 75 hot dogs in 10 minutes I might not feel my best either…

PS. We have been in touch with Rishi Sunak on your behalf. Should any of our clients feel like emulating Joey, the Chancellor assures us that yes, eating 75 hot dogs will qualify for his £10 off ‘meal deal…’